Willowdale Asset Management (Willowdale) and one of its portfolio companies have recently undergone some big structural changes.

Willowdale is now owner and manager of six portfolio companies, while Empire Continental Land, formerly the land division of Empire Communities, is now rebranded as standalone entity Precedent Land Company (Precedent).

Established in 1993 as the former corporate division of Empire Communities, Willowdale has grown from a single-project homebuilder into a diversified real estate organization. The company, headquartered in Toronto, runs a portfolio spanning North America with operations in Ontario, Texas, Georgia, Tennessee, North Carolina, South Carolina and most recently, Colorado.

Empire Continental Land was established in 2012 when Willowdale first entered the American market. “It was specifically to develop a single project in Houston, Texas,” Andrew Guizzetti, Willowdale’s co-founder and co-CEO, told RENX.

The name Empire Continental Land was chosen to differentiate the division from Empire Communities, he said. “We quickly expanded into other projects in Texas and other U.S. markets with our learnings from developing master plans there and in Ontario.”

Rationale for the Willowdale rebranding

Why the rebrand?

Guizzetti explained that since Empire Continental Land isn’t an exclusive service to Empire Communities (the company sells lots to other American homebuilders), it wanted to differentiate the division from the Empire brand altogether. This way, “we could look at other opportunities and perhaps joint ventures with strategic land developers and/or capital partners.”

All told, the move is designed to give Precedent a much broader reach and deeper impact.

The goal, Guizzetti said, is to provide more formalized central oversight of six distinct businesses with three elements: strategic oversight and direction, set best practices in each vertical and more setup for capital allocation.

He explained the change will create less confusion, allowing Precedent to operate somewhat independently.

“What’s very typical in the U.S. particularly when developing large master plans is you’re not exclusive to (it). You typically invite (several) large builders to help cycle through lots.”

The number of lots can reach upwards of 100,000, so alleviating any confusion will certainly be helpful.

Challenges and opportunities

When asked about the main challenge his team experienced with the change, “It’s signalling to the market that this is part of a broader organization and there’s a certain financial strength and connection behind it,” Guizzetti noted.

On the flip side, he said the opportunity has allowed management to consider taking on larger master-planned communities or joint ventures.

By having centralized oversight for each of Willowdale’s independent businesses, Guizzetti sees growth opportunities in three areas:

• more structured growth through independent management teams and management accountability;
• transparency giving a better view of each business and how it is operating;
• having separate and distinct capital structures in each business.

An organization that ‘relies heavily on talent’

Each Willowdale division and the geography in which it operates has nuanced skill requirements. Operating the companies as dedicated verticals expands each team’s local knowledge base and operational and financial expertise.

“Land development is very different by geography, so the more you have skill sets on the ground that understand how to navigate through challenges of each business, the more likely you’ll succeed and attract the right talent,” Guizzetti explained. “We’re still an organization that relies heavily on talent.”

He feels the change will open up the broader organization to more opportunities, as people cross-train in different verticals or find their strengths in different aspects of the business.

Market dynamics: What’s on the horizon

The residential market has remained strong in the U.S., and Guizzetti notes Canada has shown signs of a resurgence in the past 18 months thanks to interest rate cuts and more buyer confidence.

“It’s hard to predict interest rates in our business, (which) is the single thing that drives the cost of ownership,” Guizzetti noted. But with rates easing, he feels more buyers will likely enter the market, plus, “The decline in home prices over the last two years will help restore affordability to the market.”

While the highrise market is lagging, Guizzetti noted many developers are still considering transitioning projects from condominiums to purpose-built rentals.

“In Canada’s lowrise development, we’re still critically undersupplied, especially in the Greater Golden Horseshoe region,” he said.

As well, Guizzetti said industrial land activity has slowed from its peak but is still strong.

The big picture

In terms of how Willowdale’s recent changes align with broader company goals, Willowdale sees it as the next evolution stage across the real estate value chain.

“Each vertical is set up to grow independently while remaining in the Willowdale real estate ecosystem,” Guizzetti explained.

Ultimately, the goal is to continue to support the growth of all Willowdale portfolio companies. From a market dynamics perspective moving forward, it’s about positioning them in their own verticals to adapt to what Guizzetti described as a “volatile, uncertain, chaotic and ambiguous world.”

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The University Health Network (UHN) is extending its reach with the acquisition of 522 University Ave. in Toronto, one of the three largest office building sales in the city in 2024.

The transaction will both allow the hospital network to expand its capabilities and remove a chunk of aging office space from the downtown inventory.

The 15-storey, 210,000-square-foot tower known as the National Life Building will be repurposed to accommodate UHN’s expansion of cancer care, medical research and training. Its location puts it within a short walking distance to several neighbouring hospital facilities, subway and transit stops, the University of Toronto’s downtown campus, and the MaRS Discovery District.

“The addition of 522 University Ave. increases our capacity to drive innovation and research in cancer prevention, early cancer detection, diagnostics and treatment, as well enable the introduction of new and expanded programs at UHN,” Kevin Smith, president and CEO of UHN, said in Friday’s announcement.

UHN is a research hospital affiliated with the University of Toronto, consisting of sites such as Toronto General Hospital, the Princess Margaret Cancer Centre, and the Michener Institute of Education.

The acquisition means a drastic shift from a plan filed by its previous owner, Industrial Alliance Insurance and Financial Services Inc., a subsidiary of Quebec City-based iA Financial Group. It had proposed transforming the building into a 64-storey, mixed-use development of 579 residential units and over 226,000 square feet of office space.

RENX has learned the transaction was valued at approximately $80 million, placing it at the higher end of values for this type and quality of office property.

One of the best ways to flourish in the office brokerage business is by treating customers a little bit differently, instead of it being a standard commercial association.

“Knowing that we’re in a relationship business and not the transaction business, that’s very important. That’s the foundation of the way that I do business,” said Katya Shabanova, senior vice president at Cushman & Wakefield Inc. in Toronto.

Shabanova was recently named the SIOR Canada (Society of Industrial and Office Realtors) 2024 Office Broker of the Year.

“It’s a great honor to win that award as it’s a very prestigious award in our industry. The other nominees in that category are very strong brokers so this was very meaningful to me,” Shabanova told RENX.

The personal approach to helping clients thrive has been nurtured during her 12-year career in commercial real estate, which she entered after graduating from Western University.

George Tedder, Shabanova’s mentor

During her time at Cushman & Wakefield, colleague George Tedder has been one of her biggest boosters, according to Shabanova.

“We started off as an associate and senior-partner relationship, but over the years, have become more equal partners,” she said. “He’s a very well-known broker in the industry.

“He created a lot of the concepts that we work with today, things like net-effective rent that were not a concept before his time, so he’s really a changemaker in the Canadian commercial real estate and office leasing field. He’s been my mentor for the whole time that we’ve worked together, for 12 years.

“He taught me pretty much everything I know about commercial real estate and he has been instrumental in my success.”

As vice-chairman, office, at Cushman & Wakefield in Toronto, and with a career spanning 45 years, Tedder has seen first-hand how Shabanova has grown into a top contributor.

“She takes this job to a whole new level. Whatever the challenge or assignment, she’s so determined to do the right thing and exceed expectations, whether it’s with colleagues or clients or landlords,” Tedder wrote in comments emailed to RENX.

He knew early that Shabanova had what it takes to succeed in the sector.

“From Day 1, she was different. It’s the way she interacts with clients and really cares about service delivery; the content of the message and how it’s received and absorbed,” Tedder wrote.

Shabanova’s bespoke approach to clients

Shabanova’s approach encompasses more than just a strict, transaction-oriented manner.

“A lot of what we do is not just transactional but very strategic, very portfolio-oriented,” she said. “We look at city strategy, country strategies. It’s almost like a consulting job (rather) than a transactional broker job in a way, which we pride ourselves on, calling ourselves consultants.”

Over the years, her team has helped a diverse roster of “sophisticated players” find office space for a wide range of occupiers including financial institutions, law firms and telecommunication companies. But each client should be handled in an exclusive manner, she said.

“Every client has a unique set of fingerprints. They all have different needs and often in our industry you say, ‘Oh, it’s a law firm. I’ll treat it like another law firm and just swap a logo on a deck and send it in.’ We do not do that. It’s very important that we understand our clients’ needs and that we tailor our approach to our specific client needs. I think that doesn’t go unnoticed,” Shabanova said.

While every client has a different set of challenges, they look to brokers to guide them to the right destinations, which can at times lead to friction. But that is part of the relationship.

“They hire us to be experts. They work with us to get our professional opinions on certain things that we do, and sometimes it’s totally okay to push back on them, or to provide some controversial or innovative opinion that maybe others haven’t thought about and a lot of our clients respect,” she said.

What makes a ‘great office broker’

Shabanova believes there are three aspects to becoming a great office broker.

“It’s all about building relationships and our clients really feel the difference when you’re trying to truly help them instead of just closing a deal,” she said.

In addition, being culpable is vital to show the client that you stand behind your advice.

“It’s very important for our clients to see that we are accountable, that the deal ends with us and we take full responsibility for anything that goes wrong, that also goes a long way.”

Finally, being humble and curious are keys to improving and “never being stagnant and never thinking that you are the best in the business and nobody can catch up,” she said.

“Always trying to find ways to do things differently, do things better; relate better to our clients, to their needs, and just generally innovate in the way we do business, in the way we service our clients every day.”

What she forecasts for 2025

As she looks ahead, 2025 seems bright for commercial real estate players after some difficult times during and post COVID.

“There are a lot of mandates on the street, active tenants in the market. I think there is more confidence among tenants and landlords of some type of assets that are very optimistic,” she observed. “Tenants are starting to think about spending capital on improvements so it feels much better than it did even six months ago.”

The uncertainty around back-to-office mandates is basically over, according to Shabanova.

“Most occupants know what the future looks like for them, whether it’s two days a week, five days a week, three days a week: there’s a lot more clarity on that. We’re not really having these conversations as much.

“I also think the market generally is picking up and what is happening in Toronto – and I believe it happens across major markets right now – is there has been a huge flight to quality.”

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Broccolini has sold two industrial buildings totalling almost a million square feet, located on 63 acres of land in Cornwall, Ont., to Michelin for $246.35 million.

Broccolini purchased 80 acres from the City of Cornwall in Cornwall Business Park in June 2022. It’s across the street from where it built a 1.35-million-square-foot distribution centre at 1501 Industrial Park Dr. for Target in 2012.

“We had a pretty strong conviction in being able to invest in that market on the basis of it representing a logistical hub in eastern Canada to service both Ontario as well as Quebec,” Broccolini director of real estate development Toni Wodzicki told RENX in an exclusive interview.

Target’s tenure in Canada was short-lived and its former Cornwall facility is now used by Walmart.

What Michelin purchased

Michelin expressed interest in the fall of 2022 that it would like to occupy the Cornwall property and own it once Broccolini was finished construction. The two companies negotiated a structure for the recently closed deal.

Construction began in August 2023 and was completed in October. The world’s second-largest tire company is already operating at the property, which is considered its flagship distribution centre for Canada.

The property is occupied by two 36-foot clear-height buildings connected by passageways. One is more than 655,000 square feet and the other is more than 325,000 square feet.

The two buildings combine to have 73 loading dock doors and three drive-in doors. There’s parking for 402 trailers and 120 vehicles.

Michelin has the ability to double the size of the smaller building in the future if it wishes, according to Wodzicki.

Broccolini still owns land in Cornwall

Broccolini still owns 17 acres at 1500 Industrial Park Dr. that’s available for a design-build opportunity for various size requirements up to 342,000 square feet.

“We’re not building it on spec, but we’re actively pursuing design-builds or partnerships on the property,” Wodzicki explained.

The land is part of the over-1,600-acre Cornwall Business Park, which is home to large distribution centres, manufacturers and transportation companies.

It’s immediately adjacent to Highway 401 and a 60-minute drive from international airports in Montreal and Ottawa. Access to the United States is 4.8 kilometres away via the Seaway International Bridge, a deep sea harbour is 3.2 kilometres away and a CN freight line bisects the park.

“The City of Cornwall would like to congratulate Broccolini on yet another successful project in the Cornwall Business Park,” Mayor Justin Towndale said in a statement provided to RENX. “This state-of-the-art facility further solidifies Cornwall as a major distribution hub in Canada. We look forward to continuing to work with Broccolini on other development lands in the city.”

Land bank and future industrial acquisitions

Broccolini provides a range of services, acting variously as a general contractor, construction manager, project manager, property manager and developer.

The company owns other Ontario development properties in Nepean and Kanata in Ottawa, St. Thomas, Hamilton, Caledon, Woodstock, Puslinch, Whitby, Cambridge, Milton, Kitchener, Innisfil, Oshawa and Halton Hills.

Wodzicki declined to comment on any specific future industrial developments the 75-year-old company has in its pipeline.

“We’re sitting on great land that we have ready to engage to work with our industry partners to deliver on projects in new, high-efficiency space,” Wodzicki said. “But we’ll be patient as we assess those opportunities and where we can deliver them.”

Wodzicki anticipates acquiring more industrial development sites in the province in 2025.

“We take a broader view of the market in terms of where there are opportunities to service the logistical space,” Wodzicki said of Broccolini’s industrial acquisition and development strategy in the province.

No new spec-built projects at this time

“As it stands right now in Ontario, we’re not building any spec projects.

“But we still have active demand from users seeking to approach us with more curated builds and opportunities. And as such, we feel a number of projects will kick off for us in 2025 on a design-build basis.”

Broccolini also owns 40 development sites in Quebec, most within relatively close proximity of its home base of Montreal.

While the industrial construction and leasing markets were hyper-active earlier this decade as online shopping spiked and concerns with supply chains rose, huge rent increases have moderated and vacancy rates have crept up more recently.

“You can’t paint the entire market with one brush,” Wodzicki explained, noting there are differences even between nodes in the Greater Toronto Area. “The fundamentals for large-scale industrial development still exist.

“We still aren’t in a completely balanced market as it relates to supply and demand.”

Broccolini is focused on getting its sites shovel ready so it can act quickly and accommodate development opportunities when they arise.

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Soneil Investments has acquired Millcreek Business Centre, comprised of seven industrial buildings in Mississauga and totalling 324,362 square feet on 20 acres of land, for more than $100 million from GWL Realty Advisors (GWLRA).

The 2020 annual report for GWLRA’s Canadian Real Estate Investment Fund No. 1 showed it purchased a 50 per cent stake in the buildings at 6665-6725 Millcreek Rd. in June 2003. That ownership had increased to 100 per cent in subsequent annual reports.

“This was our single largest industrial acquisition to date, so we were happy to be able to complete a deal like this in the current market,” Soneil president and chief executive officer Neil Jain said in an exclusive interview with RENX.

Colliers brokered the transaction.

“From what I heard, it was quite a competitive process,” Jain said, “and based on my experience, these bids tend to involve institutional buyers.”

Millcreek Business Centre’s components

Millcreek Business Centre’s buildings, which range in size from 34,950 to 63,401 square feet, were constructed from 1987 to 1989. Each of the buildings offers truck-level doors.

All of the buildings except one are full, giving the portfolio a 92 per cent occupancy rate, according to Colliers’ marketing brochure. They’re occupied by 31 tenants with a weighted average lease term of 3.54 years at weighted average rents approximately 18 per cent below market.

“Average rents in place are roughly $15-and-a-half, which is great because it really optimizes the amount of stability and in-place rent that’s there, but it’s not fully at market, which also allows us to have a lot of upside in the future,” Jain observed.

There are a variety of different types of businesses and national, regional and local tenants in the buildings.

Jain said the portfolio “represents our bread and butter, which is small bay industrial tenants with minimal concentration risk and opportunity to grow the rent over time. They’re well-maintained, institutionally managed assets with clear heights throughout the buildings well over 20 feet, and for shipping it can accommodate 53-foot trailers throughout the complex.

“The main part of the asset that we really liked was that there wasn’t too much concentration risk with a single tenant. The average tenant size is under 10,000 square feet, so that allows us to not be so heavily dependent on any one given tenant.”

Prime industrial location

Millcreek Business Centre is easily accessible via commuter roads, 400-series highways and public transit. The location is also in reasonably close proximity to Toronto Pearson International Airport and rail intermodal terminals.

“I think this specific node of Mississauga is probably one of the strongest performing nodes for industrial in the GTA (Greater Toronto Area) and probably throughout Canada,” Jain said.

While industrial rents have stopped climbing at the rapid rates of earlier this decade, Jain said small bay spaces have been resilient, continue to perform well and remain in demand.

“By having a combination of larger and national tenants, there are always tenants who are looking to expand their premises,” Jain said. “So as vacancies come up in the units beside them, they’re always our first call to be able to see if they’re interested. And many times they are.”

More acquisitions expected in 2025

Soneil is a private real estate corporation with a portfolio of more than five million square feet of industrial, office and retail space across the GTA.

The company will be seeking assets similar to Millcreek Business Centre in 2025, when Jain feels more acquisition opportunities will crop up due to lower interest rates and narrowing bid-ask spreads.

While the focus will remain on industrial properties, Soneil is willing to look at other asset classes if it likes their long-term prospects and lending partners are supportive.

“Over the last three or four years we’ve been buying somewhere between $200 and $300 million,” Jain explained. “This year, after this transaction we’ll be at around $150 million, but we’re optimistic that next year we’ll be somewhere in the $300- to $400-million range.”

Soneil is rezoning elements of its portfolio for potential future development, but it’s a long process and properties are already providing strong cash flow so he said there’s no urgency to aggressively move into that area.

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Three high-ranking Canadian real estate executives and one European colleague closed a recent forum in Toronto by looking beyond the “Survive ’til 2025″ mentality to “Hello to a Fix in 2026.”

Fengate Real Estate president Jaime McKenna and CBRE Canada president and CEO Jon Ramscar moderated the discussion at the Real Estate Forum, which explored risks and opportunities that lay ahead and what courses of action could follow.

“What we’ve seen unfold, at least across our platform over the last two years, is a capital recession and not an operating recession,” KingSett Capital CEO Rob Kumer said. “I think it’s an important distinction because one is structural and one is cyclical.

“The properties in our world are generally full, rents are generally growing, tenants are healthy and paying rent, and there’s lots of cash flow.”

Investment returns

McKenna said bonds and guaranteed investment certificates have produced better returns than real estate over the past 12 to 24 months and she asked Frankfurt, Germany-based Alexander Heijnk, Deka Immobilien’s head of acquisitions and sales for the Americas, how to justify real estate investment.

Heijnk said the same issues faced by the real estate industry in Canada are shared globally, so countries can learn from each other. He has a positive outlook and believes real estate returns will be more attractive than bonds in 2025.

Slate Asset Management has approximately $12 billion in assets under management in nine North American and European countries and founding partner Blair Welch said money will flow to the easiest places for the highest returns.

While interest rates are important, “rents are everything for real estate,” said Welch, who believes investment must be spurred to drive the economy and, subsequently, rents.

While Kumer doesn’t think we’re in front of a big development cycle, he believes investment, transaction volume and property values will pick up again and “we’re on the verge of a very strong, very competitive bull run.”

Annie Houle is head of Canada for Ivanhoé Cambridge, which oversees the real estate portfolio of CDPQ, a global investment group with $452 billion in assets. CDPQ holds interests in more than 1,500 buildings — primarily in the logistics, residential, office and retail sectors — and held $77 billion in gross real estate assets at the end of 2023.

Houle said real estate requires leverage and is riskier than other investment types. She noted that institutional allocations to real estate had grown by 20 per cent over the previous 10 years but have been flat over the past two. Seventy per cent of institutions are looking to reduce their real estate allocations while 13 per cent want to increase them, she added.

Office

Heijnk’s company owns around 580 properties in 27 countries on five continents. It purchased Vancouver office buildings at 401 W. Georgia St. and 402 Dunsmuir St. from CPP Investments and Oxford Properties for about $300 million early this year.

Heijnk said Vancouver is the strongest office market in North America due to its overall fundamentals, quality of life, city planning and infrastructure.

“There’s a huge disparity between the investment value and the operating value, and that’s where the opportunity is,” Kumer said.

“Spread investing is back and it’s the lowest-risk kind of real estate investing,” Kumer added later. “All you have to do today is buy an office building at a seven cap and finance it at five per cent and then just sit back and collect rents.”

There’s demand for new and highly amenitized office buildings. And as A- and above classified office buildings fill up, Kumer thinks demand should increase again for class-B buildings. But he expects that a lot of class-B and -C buildings in Toronto will struggle for a long time.

“We’re not oversupplied, we’re under-demolished,” Kumer observed.

Residential

Canada has a housing shortage and recent changes to immigration policies weren’t well thought out, according to Kumer. He thinks immigration should increase as long as it brings in people with needed skill sets who can bolster the economy.

There should also be policies in place so there’s housing and infrastructure to accommodate these new immigrants, he added.

Ivanhoé Cambridge is underexposed to residential real estate in Canada, so Houle said it’s looking to intensify its retail platform with multiresidential development.

Heijnk said rent controls in Germany are annoying for landlords but create stability and the country is attractive to international investors seeking multifamily properties.

Industrial

Kumer said industrial real estate fundamentals are solid and, while rents have moderated after steep increases and the vacancy rate has risen from less than one per cent to five per cent, he’s not concerned about a supply-and-demand imbalance.

Ivanhoé Cambridge owns or partially owns industrial/logistics properties in Canada, Singapore, Australia, Brazil, China, the U.S., Indonesia, Germany, France, the United Kingdom and the Netherlands. Houle said it’s looking at adding to the portfolio.

“With the supply chain, we went from just in time to just in case,” Houle said, noting the Canadian industrial sector has solid fundamentals and significant mark-to-market pricing differences.

Retail

Slate owns more than 600 grocery stores globally, with occupancy in the mid-90 per cent range and growing rents. Welch said there haven’t been many new grocery stores built in the U.S. since the financial crisis of 2007 and 2008, so he’s bullish on essential retail as an asset class and has noticed lenders and capital providers embracing it.

Ivanhoé Cambridge owns several malls that Houle said have gone through some rough times over the past eight years, but sales and traffic are now trending upward and retail had the highest return of any asset class in 2023 according to the MSCI/REALPAC Canadian Property Index.

“The supply has gone down and the demand is going up,” Houle said, noting that quality malls are mostly full and same-property net operating income growth is in the high single digits.

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Lakeridge Logistics Centre in Ajax, Ont., Canada’s largest speculative-build industrial property, is seeking tenants.

Pure Industrial developed the 1.2-million-square-foot facility at 537 Kingston Rd. E. in the city east of Toronto. Avison Young’s Ben Sykes, Eva Destunis and Ryan Hood are working on Pure’s behalf to lease it.

Construction started a year ago and the building is a month away from substantial completion. Pre-marketing didn’t commence until construction started and interest has been picking up as completion nears.

“We would have been open to pre-leasing it,” Pure president and chief operating officer David Owen told RENX in an interview that also included Sykes, a principal at Avison Young. “But the majority of the activity when we started was on the smaller side of things.

“The larger-scale interest has picked up more when the building started showing shape and completion was on the horizon.”

What Lakeridge Logistics Centre offers

Lakeridge Logistics Centre provides:

• a 40-foot clear height;
• 5,000 amps of power;
• LED lighting;
• 207 truck-level doors and four drive-in doors; and
• parking stalls for 619 cars, 308 trailers and 38 electric vehicles.

Office areas can be built to suit.

“We built this to suit everyone for the long term and didn’t build it so we could maximize site coverage, which we’ve seen because of how much land prices have risen over the past two years,” Owen said. “We see this as a forever destination for somebody looking to set up shop in this neck of the woods.”

The facility is easily visible from Highway 401 and close to a large variety of stores, food and beverage outlets, and bank branches.

Sustainability is a separator

Lakeridge Logistics Centre’s design is dedicated to long-term zero-carbon performance, yielding potential savings of as much as 19 per cent in cumulative costs over 10 years.

“We’ve got 30 locally manufactured, custom-made, roof-mounted electrified heat pumps on the roof that condition in the summer if needed and can heat the building,” Sykes explained.

“We’ve effectively de-carbonized any type of heat source in and out of this building. For a building of this scale, nothing like that in Canada has ever been built before.”

The class-A building’s other sustainability measures include:

• a high-performance envelope and ultra-efficient mechanical systems;
• solar power generated on-site to meet a portion of the building’s energy load;
• future-proofed infrastructure allowing for the building to have 100 per cent of its anticipated electricity needs met with solar power; and
• superior indoor air quality and filtration.

“I think this is going to be the new gold standard for what big spec development is going to be, not just in Toronto, but Canada and potentially North America,” Sykes said.

Hoping for single tenant, but can demise

Lakeridge Logistics Centre can be leased to one tenant or demised for multiple users to take as little as 250,000 square feet. Owen said the preference is for one tenant to lease it all, but the design can accommodate three or four if that doesn’t happen.

“We’re not going to chase the groups who need 100,000 square feet,” Sykes noted. “We chase the groups who need 1.2 million.”

There are 30 industrial buildings in the Greater Toronto Area with more than 900,000 square feet of space, according to Avison Young.

Toronto-headquartered Pure is owned by Blackstone and Ivanhoe Cambridge. It has a portfolio of 41 million square feet of industrial real estate at more than 400 properties across Canada.

Its development pipeline includes another significant project just north of Toronto.

Pure and Hopewell Development, along with leasing partner CBRE, started marketing Bram10 at 10 and 20 Whybank Dr. in Brampton, Ont. early last month. Its two buildings are both demisable.

One is 458,496 square feet with a 40-foot clear height, 58 dock-level doors, four drive-in doors and 48 trailer parking spaces. The other is 167,909 square feet with a 36-foot clear height, 27 dock-level doors and two drive-in doors.

The state of the industrial real estate market

While the industrial construction and leasing markets were hyper-active earlier this decade as online shopping spiked and concerns with supply chains rose, huge rent increases have moderated and vacancy rates have crept up more recently.

“What we’re seeing is a normalization on the demand side,” Sykes explained. “What groups are doing is, they’re looking really strategically at their real estate.

“This is about functionality. This is about bottom-line results. This is about employee welfare. This is about, in a lot of cases, the ESG (environmental, social and governance) commitments that they’ve made.”

Sykes said there was positive absorption for industrial space in Q3, tenant demand seems to be picking up, and he expects continued stabilization of rents, so he’s optimistic about the market picking up in 2025.

Owen said consumer confidence may have bottomed out, and interest rates have started to decline, which should also boost business confidence and drive capital investment within the supply chain.

Pure is coming off of two successful months

“We did our two highest months ever in terms of volume of square footage and number of deals in October and November,” Owen said. “That leads me to believe that it’s not just a consolidation play.

“You’re not just seeing people look for space to make things more cost-effective, but you’re seeing expansion back. You’re seeing people taking a longer-term view of where they need to be.”

Sublet activity has dropped “drastically” over the past two months, according to Owen, who expects that to continue.

Owen added that new industrial building starts are down 90 per cent from the high period in Q3 2023 and a lot of industrial land is being held.

“Risk is a little bit off on the development side and I think it’s project-specific,” Owen observed. “There are a lot more micro details going into whether you go up today or not, and it depends on the sub-market you’re in.”

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The outlooks for Canada’s commercial and residential real estate markets heading into 2025 remain mixed depending on the asset class, geography and other factors.

Those were among the sentiments expressed in interviews with more than 200 Canadian C-suite executives and almost 1,600 survey responses compiled from June through August that contributed to PwC and Urban Land Institute’s annual Emerging Trends in Real Estate report.

PwC Canada national leader for private clients Frank Magliocco outlined the report findings, and a panel discussion moderated by PwC Canada partner and national real estate tax leader Fred Cassano provided additional insights during a recent ULI Toronto event at the Fairmont Royal York Hotel.

“What we heard about is a real estate market that’s continuing to grapple with really significant capital constraints, making deal-making really challenging,” Magliocco told the audience of CRE professionals.

Capital constraints hamper investment

While this has led to a delay in some investments and some investment strategies being reconsidered, access to capital is expected to improve in 2025.

Oxford Properties vice-president of development Veronica Maggisano said her company is viewing things more positively now than a year ago. It is preparing to put shovels in the ground for some major projects over the next few years with the backing of its pension fund owner, OMERS.

Another major issue facing the industry is providing needed infrastructure and transportation to create an environment more conducive to investment and development.

“We’re starting to notice, especially in cities like Toronto, that many of the communities that we’re developing in are at this inflection point, where the public infrastructure needs to be expanded in order to keep up with the growth that we’re anticipating,” Maggisano observed. “And in some cases, the developer is actually being asked to foot the bill for those expansion costs.”

Industrial, multifamily assets remain the best bets

Magliocco said industrial and multifamily assets remain the best bets for investment, although alternative asset classes such as data centres and student and seniors housing are also seeing increased investment.

“In 2025, private investors, especially family offices and private equity funds, we believe are going to emerge as the most active buyers — filling the gap that has been left by pension funds, insurers and REITs,” Magliocco said.

“And with the shrinking domestic pool, foreign investment opportunities are actually expanding — especially coming out of the U.S. and western Europe.”

Peter Senst, president of Canadian capital markets for CBRE’s national investment team, said he was recently speaking with investors in Asia who told him it’s difficult to underwrite in Canada because the conditions change too much and too quickly.

Frozen condo market

The condominium market, particularly in Toronto and Vancouver, remains frozen. Purchase prices are stagnating and declining, rents are softening and fewer new projects are being launched.

Devron Developments president Pouyan Safapour called the situation “absolutely horrible,” saying the 567 condo units sold in Toronto during the third quarter of this year was the lowest since the early 1990s.

“Lenders are scared to lend to condo projects, full stop,” Safapour said. “The word condo right now is a dirty word.”

However, there was a tone of optimism for the future. There have been fewer distress sales than anticipated in the sector and the long-term condo market is expected to fully recover due to demographics, according to Magliocco.

Unaffordable housing

Housing affordability remains a major issue as the cost of buying and renting are reaching unsustainable levels for many Canadians.

“While governments have announced measures aimed at increasing supply, industry players believe that more comprehensive efforts are needed to tackle this complex challenge,” Magliocco said, pointing out concerns with long and complicated approval processes, labour shortages and rising costs.

“We need more innovation in the entire industry by all stakeholders to drive more efficient supply,” Magliocco continued. “Whether it’s new ownership models, financing models, better building methods or even just consistent building codes among the different municipalities, we need much more co-ordinated innovation.”

More focus needed on climate strategies

A big divide remains among Canadian real estate companies when it comes to decarbonization and other environmental initiatives, as some executives still only see these as merely compliance exercises that have to be dealt with.

“Strengthening your climate strategy isn’t just about compliance, it’s now about a competitive advantage for buyers, investors and lenders alike,” Magliocco warned. “For those that are looking to tap into institutional capital, environmental performance and disclosure are critical.”

CPP Investments director of real estate investments Janet Chung said a lot of her company’s attention over the past decade has been on decarbonization. It has now also sharpened the focus on physical climate risk and how changing weather patterns can potentially impact its portfolio.

Top markets to watch in 2025

The report named Calgary the top market to watch in Canada in 2025, followed by Vancouver, Toronto, Edmonton and Montreal.

Senst shared the positivity regarding Calgary during the panel discussion. He said investors are looking for “deep value” in office properties while multifamily and industrial are performing consistently well.

Senst said offshore capital had pulled back in Vancouver but has been coming back over the last few months. That should give a boost to the local real estate market.

Fifty to 60 per cent of Canadian real estate investment is done in Toronto, according to Senst, who added that investors in the market are looking for scale and interesting deals.

Senst said the Montreal market has been consistent and noted it remains more of a yield play than Toronto.

Source Renx.ca. Click here for the full story.